Everything You Need To Know About The Panama Hearings And How They Affect Malta

The European Parliament has recently set up a “special” Committee to investigate the Panama Papers scandal. In order to understand what is going on and to try and answer the inevitable questions that came up after Politico’s unexpected and bruising article last month, here are the main issues of contention and an explanation about how the prospective Committee will work.

1. Why are we here in the first place?

The Prime Minister’s Chief of Staff, Keith Schembri, and the former Energy (now unassigned portfolio) Minister, Konrad Mizzi, were both named in the scandal last April, better known as the ‘Panama Papers’. According to the revelations, both men, whilst in government, urged their legal representatives to set up an offshore trust in New Zealand and companies in Panama, and then attempted to set up accounts with eight different banks in various tax haven destinations around the world.

Since this damning information came to light, Schembri and Mizzi have attempted to appease concerns in Brussels as well as in Malta. However, despite their efforts to put the issue to rest, many Maltese continue to remain apprehensive about the affects this could have on the country’s reputation. Furthermore, even though the government in Malta did take certain steps to help assuage these worries, the European Parrefuses to consider it closed case, and wants to ensure that those involved are held accountable for their actions.

2. Why is the European Parliament interfering?

The parliament estimates that tax evasion and avoidance costs the EU between €50bn and €70bn a year and claims that the losses from money laundering are of a “huge scale”. The Parliament is also reflecting the anger of Europe’s citizens at individuals and large Corporations trying to hide their money to avoid paying taxes. They are looking to push for action that finally puts a stop to the unfair burden being shouldered by ordinary Europeans.

3. When was the Committee established and who will be in it?

The Committee was created on the 8th of June and its members were named just over two weeks after. The head of the Committee is German European People’s Party (EPP) MEP Burkhard Balz.

65 members of the European Parliament (MEPs) from different political hues will sit on the Committee. Moreover, Maltese PN MEPs Roberta Metsola and David Casa have been included as full members of the Committee, whilst Therese Comodini Cachia, also a PN MEP, and former PM Alfred Sant, from the PL, will act as substitute members.

The role of the Maltese MEPs, according to sources in the European Parliament, will be to “defend Maltese interests and to illustrate that Malta has an honest and fair tax regime”.

4. Has anyone from Malta been called to appear in front of the Committee?

Keith Schembri and Konrad Mizzi have both been touted as possible invitees and have danced around questions on whether they would be willing to appear before the Committee. When asked by the Malta Independent on whether they would accept an invitation from the Committee, they both replied, “If I receive such a request and justification, I will reply accordingly”.

5. Will Schembri and Mizzi receive rough treatment?

The inquiry, as is always the case with the European Parliament, will be extensive and thorough and there’s definitely a chance that Schembri and Mizzi will face relentless pelting from the Committee’s members. Ana Gomes, a Portuguese MEP from the Socialist Group in the Parliament (S&D) and vice chair of the Committee, has already highlighted the attention that Malta will be getting, saying that she plans to “propose that Malta will be high on our agenda”.

6. Can Schembri and Mizzi reject the invitations? If so, what would be the repercussions?

Yes, Schembri and Mizzi can both refuse to appear in front of the Committee.

However, refusing to appear when called upon may backfire and put the Maltese government on a collision course with the Parliament. More specifically, Malta risks the prospect of facing “political sanctions”, with future Maltese initiatives and nominations being blocked, should Mizzi and Schembri ignore the Parliament’s request. Moreover, as Politico’s article pointed out, a snub by the Maltese government might cause the European Parliament to deliberately make Malta’s EU Presidency next year that more difficult. This is not an outcome Malta wants.

7. Do Schembri and Mizzi need to appear themselves or can a representative go to the hearing on their behalf?

Schembri and Mizzi can send a legal representative in their stead to appear in front of the Committee. By doing this though, it may still be seen as if the Parliament is being given the cold-shoulder and this may come across as if they have something to hide.

It is still unclear at this point in time whether the two will need to appear in front of the Committee or if the Parliament plans to send a fact-finding delegation to Malta. Both are options and the Parliament is mulling over the steps to take.

8. Have any other names been mentioned?

Mossack Fonseca, the firm at the center of the controversy, as well the Panamanian government, have both been urged by the EPP to send representatives to the hearings.

Moreover, the current EU Commissioner for Climate and Energy for Spain will appear in front of the Committee. The Commissioner is linked to the Panama Papers leaks for his failure to declare his shares in two oil companies in his declaration of interests before the European Parliament and for actions he took relating to tax amnesty when he was Spain’s Minister of Agriculture.

9. What are the views of the different political groups?

The majority of the major political groups in the European Parliament have a unanimous position towards the issue of tax avoidance. They're of the opinion that for far too long certain member states failed to implement the EU rules on money laundering and that, in order for the EU’s citizens to feel that they are not the only ones contributing to the state’s coffers (half a million people have signed a petition calling on EU regulators to prosecute banks), it’s high time that tax haven regimes are abolished in Europe and that individuals and companies pay their fair share of taxes.

10. What will the Parliament do with the Committee’s conclusions?

The Committee will draw up an official report based on the Committee’s findings. The Parliament can then potentially decide whether or not to urge the European Commission to come up with draft laws that push member states to take action on the report’s recommendations. In addition to this, the Parliament can also make a non-binding request for a full inquiry by the European Commission. Shit can seriously start to hit the fan then.

11. Does this call into question Malta’s tax regime?

Not necessarily. But when other countries are already suspicious of Malta's tax laws it doesn’t help if we paint a picture of a country that doesn’t take this stuff seriously. The last thing we want is the EU Commission breathing down our necks. We need to play by the rules.

Photo: Leslie Vella

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